Tax Execs Still Clinging to their Spreadsheets

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Despite a push to automate tax departments, corporate tax heads say they’re not backing away from spreadsheets anytime soon. More than 60 percent of 100 tax executives responding to a new global survey by PricewaterhouseCoopers and the Manufacturers Alliance for Productivity and Innovation (MAPI), a membership organization of manufacturers, said they continue to use spreadsheets as a provisional tool in their tax departments even amid the use of more complex tax technology tools.

Spreadsheets are being used as significant data-storage and reporting tools, according to the report. For example, nearly 70 percent of respondents, which are representatives of mid-cap size companies to large firms, said they used spreadsheets to perform ongoing legal entity reconciliations.

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“It’s pretty clear that the use of spreadsheets is likely here to say,” adds Michael Burak, U.S. and Global Industrial Products Tax Leader at PwC. “Corporations need to think about what the key strategies are and what controls need to be put in place if they are going to retain that type of approach.”

But spreadsheets are also part of the reason that “tax departments spend a significant amount of time gathering data to perform tax-specific functions” instead of just analyzing data, according to the report. Often companies can have separate and redundant sets of processes for internal tax calculation and external compliance, explains Todd Bixby, tax technology leader at PwC. Such companies would be better served by streamlining the entire process with better data integration, he adds.

Whether corporate executives are using a more technologically-advanced approach to tax strategy or one involving heavy use of spreadsheets, corporations need to be careful not to end up with “disjointed and siloed solutions,” notes the report. Instead it recommends keeping information in a common location and using standardized formats, which can enable efficient sharing of data and information.

“Tax is very process-driven and document-intense,” says Bixby. Being audited, he notes, can be difficult for corporations, particularly if they are maintaining multiple versions of data without a more technologically enhanced document flow system that can integrate the data.In fact, 85 percent of the survey respondents said “better data and solution integration would improve provision and compliance efficiency.”

And 20 percent of the respondents who experienced either a significant deficiency or a material weakness related to tax in connection with their financial statements over the last three years also agreed that more advanced technology or data would have actually helped them to avoid those deficiencies.

Yet email and the use of shared drives — simple, old-fashioned tools compared to sophisticated software — are still quite common in corporate tax departments . For example, more than 90 percent of the respondents in the survey rely on email and shared drives as the primary documentation- management approach.

However, says Burak: “the proliferation of shared drives and other historic tools poses challenges.” Without more sophisticated data there are more chance of errors and inaccuracies, he says.

Still, any decision on whether tax departments should stay with their current tax technology or upgrade must come from the top down in an organization. “There are CFOs that are very much aligned and supportive of process improvements,” he says. But others “still have tax as a cost center and it’s more of an after-thought.”